KelpDAO Hack Triggers $280M Crypto Drainage and Pushes Aave into Bad Debt

A shocking hack shaken the entire decentralized finance (DeFi) network this weekend. Particularly, on Saturday, the hack of the renowned KelpDAO has led to a theft of more than $280M across Arbitrum and Ethereum. As per the data from “mufettis,” the KelpDAO hack has resulted in hefty debt on Aave, a popular decentralized lending entity. The attacker borrowed $ETH coins against $rsETH after minting them and laundered the drained funds via Tornado Cash.

Aave was hacked following an attack linked to KelpDAO, resulting in over $280M in losses.

The attacker minted rsETH, borrowed $ETH against it, and then obfuscated the funds using Tornado Cash.

In the aftermath, @aave dropped by 10%, while Ethereum declined by approximately 3%… https://t.co/4Z4hpG3rkK pic.twitter.com/Iiyy43l7eH

— mufettis 🐋 (@nftmufettisi) April 18, 2026

KelpDAO Hack of Over $280M Impacts Arbitrum, Ethereum, and Mounts Bad Debt on Aave

The on-chain data points out that the KelpDAO hacker has stolen over $280M on Arbitrum and Ethereum. The incident has also been heavy on Aave in terms of bad debt. Specifically, following minting $rsETH tokens, the attacker borrowed $ETH and rapidly laundered the amount via Tornado Cash.

Following that, the fallout broadened beyond Kelp, with Aave witnessing a direct impact of the exploit. The hacker’s strategy to mint $rsETH and then borrow $ETH left a notable bad debt on Aave v3. Because of this, the native token of Aave plunged by 10%, whereas Ethereum itself recorded a dip of nearly 3%.

DeFi Sector Faces Potential Cascading due to Ethereum and Aave Fallout

With this hack, the investor confidence has dropped to a significant extent. In this respect, the total market capitalization sits at the $1.723B mark. Additionally, the wider market also reacted to this move, as Ethereum’s dip further highlights apprehensions over cascading risks that such large-scale exploits trigger.

According to mufettis, the staggering $280M drainage from KelpDAO and its wider impact across Aave, Ethereum, and Arbitrum could have dangerous implications for the wider DeFi sector. Thus, this hack is more than a financial loss, serving as a noteworthy reminder of the DeFi landscape’s challenges and the need for better security safeguards and innovation.